American employers continue to shed workers at a staggering rate as a resurgent coronavirus and the absence of new federal aid take a toll on economic growth.
The Labor Department reported Thursday that 886,000 Americans filed new claims for unemployment benefits last week, an increase of nearly 77,000 from the previous week. Adjusted for seasonal variations, the total was 898,000.
After dropping in late spring and early summer as pandemic-related lockdowns eased, new claims for state jobless benefits had been steadily totaling about 800,000 a week, far above the level in previous recessions.
“The numbers are extremely worrisome, in my opinion, and they point to a labor market that is struggling to make progress,” said Gregory Daco, chief U.S. economist at Oxford Economics.
New claims for Pandemic Unemployment Assistance, an emergency federal program that covers freelancers, self-employed workers, part-timers and others who don’t qualify for benefits under the regular unemployment system, were tallied at 373,000, down from 474,000.
The data do not include fresh figures for California, which has temporarily stopped accepting new unemployment applications to address a huge processing backlog and weed out fraud. Instead, the report incorporated the last weekly figures available.
Over the past month, large employers including United Airlines, Disney and Allstate announced tens of thousands of layoffs, and more are expected as sectors like leisure and hospitality struggle. In some states, restaurants have salvaged some business by serving diners outside, but many will lose that option as temperatures fall.
Despite the widespread economic pain, Republicans and Democrats in Washington have been unable to agree on a new relief package, a failure that may cause the economy to slow further in the coming months. Federal benefits created in March to supplement state payments to the unemployed are set to expire by the end of the year.
A jump in coronavirus cases in the Midwest and Western states has stirred fears of renewed lockdowns even as layoffs by large employers batter the work force.
“The course of the virus determines the course of the economy,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “You can’t fully reopen with the contagion so high.”
More and more Americans are relying on a federal program designed to help the jobless as state unemployment benefits run out.
The program, Pandemic Emergency Unemployment Compensation, was created by Congress in March to provide 13 weeks of aid when regular state unemployment benefits expire — typically after 26 weeks.
It has now been more than 30 weeks since unemployment claims spiked in March, when the pandemic first forced the economy into lockdown mode, so millions of unemployed Americans are starting to qualify for the extended benefits.
But getting on the rolls isn’t easy, experts say. “The transition from regular state benefits to P.E.U.C. is not going smoothly,” said Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, a left-leaning research group.
In some places, recipients of state unemployment benefits haven’t been notified of their eligibility for the federal extension, and aging computer systems have slowed the processing of applications.
Still, in the week that ended Sept. 26, the most recent period with available data, nearly 2.8 million people were getting Pandemic Emergency Unemployment Compensation benefits, a jump from fewer than two million the previous week. That increase was roughly equal to the decline in the number collecting state benefits.
The federal program is set to expire at the end of the year, and if it is not extended by Congress, “we’re going to see a disaster,” Ms. Shierholz said. “There will be a huge drop in living standards and an increase in poverty as well as downward pressure on economic growth.”
For those who qualify, the program has helped as they search for work.
Jared Gaxiola of Torrance, Calif., was laid off from his job as a freelance lighting technician in March, after live events were canceled across the country.
When Mr. Gaxiola’s state benefits ran out in mid-September, he was able to get a 13-week extension through Pandemic Emergency Unemployment Compensation.
Mr. Gaxiola, 35, hopes to find a job by the time the payments run out again in December. But with entertainment work still scarce, he worries about how he will pay his rent in the new year.
“I could probably borrow money from my sister if I needed to,” Mr. Gaxiola said. “But I really don’t want to have to do that.”
Before the pandemic struck, Chloe Ezi was a lifeguard at a public aquatic center in Powder Springs, Ga. It was part-time work, at $11 an hour, but she was able to bring in an extra $300 a week by teaching private swim lessons.
In March, Ms. Ezi was sent home for three months when the aquatic center closed during coronavirus lockdowns. Because she continued to be paid half her wages — about $75 a week — the pool told her that she was not eligible to file for unemployment benefits.
Ms. Ezi, 19, was called back to work in May, but because virus restrictions kept her from teaching private swim lessons, she was able to bring in only about $150 a week — barely enough to cover her $280 monthly car insurance bill, her $80 cellphone bill, and $100 monthly payments to Penn Foster College, where she is completing a dental assistant certificate program, plus groceries and other necessities.
“That’s not a lot to live off of,” Ms. Ezi said. “I was zeroing out my paycheck every month.”
To save money, Ms. Ezi lived with her boyfriend in his parents’ house.
“We’re all just a big family living in this house together,” she said. “It can get pretty stressful living with so many people like this.”
Tired of living in such close quarters, Ms. Ezi began looking for a job that would pay more. In August, she found a full-time position as a sales representative at a store that sells birding equipment, where she makes $13 an hour plus tips. She remains on the staff at the pool, where she still picks up an occasional shift.
Now she and her boyfriend can afford to rent a one-bedroom apartment in Smyrna, Ga. They moved in on Wednesday.
“My new job allowed us to finally get our own place,” she said. “I’m feeling pretty proud of myself right now.”
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Global stocks tumbled on Thursday, and Wall Street futures pointed to a drop of more than 1 percent when trading begins, as earnings reports reminded investors of the challenges so many companies face amid a second wave of coronavirus cases. New restrictions were imposed on London after a curfew in Paris and other French cities.
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Share prices for airlines and hospitality companies, already battered this year, fell as the tightening rules in European cities cast a shadow over travel and spending during the coming holiday season.
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The investment mood was further dampened by comments from U.S. Treasury Secretary Steven Mnuchin, who said on Wednesday that he did not expect an economic relief package before the presidential election next month. It’ll be another blow to U.S. companies whose prospects have diverged from the country’s large banks, which have benefited from an increase in trading.
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Also likely to weigh on sentiment Thursday, was the Labor Department’s report on Thursday that 885,000 Americans filed new claims for state unemployment benefits last week, an increase from the previous week that highlights that employers continue to shed workers at a staggering rate.
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The Stoxx 600 Europe dropped 2.2 percent. Britain’s FTSE 100 fell 2.3 percent, Germany’s DAX index was down 3 percent and France’s CAC index was 2.3 percent lower. Asian indexes closed broadly lower, with Hong Kong’s Hang Seng down 2.1 percent and South Korea’s Kospi losing 0.8 percent.
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Government bonds rose as investors moved to the relatively safer asset. The yield on U.S. Treasury 10-year securities, which moves in the opposite direction to prices, fell 0.03 percentage points, and Germany’s declined 0.04 percentage points to minus 0.62 percent.
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The benchmark oil prices for Europe and the United States both fell 1.5 percent.
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The slide in markets on Thursday is “linked to spikes in coronavirus cases and fears that regional lockdowns will subdue the economic recovery,” said Susannah Streeter, an analyst at Hargreaves Lansdown. “We are seeing fresh losses for airlines and travel stocks.”
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Shares in the European airline companies Lufthansa and easyJet, which were already near their lows for the year, fell more than 5 percent, and shares in IAG, which owns British Airways and Iberia, fell 4.7 percent. Ryanair shares lost 3.7 percent after the Dublin-based airline said it would fly only 40 percent of its usual capacity this winter, down from previous plans for 60 percent. Shares in United Airlines were down 1.2 percent in premarket trading after the company said it had lost $1.8 billion in the three months through September.
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Whitbread, which owns the Premier Inn chain of hotels and some restaurants, was among the worst performing stocks in Europe on Thursday, falling nearly 6 percent.
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The Swiss pharma company Roche reported sales below analysts’ expectations on Thursday, despite sales in Covid-19 tests and new medicines, and its shares dropped more than 2 percent.
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Shares in Marston’s, a large chain of bars and pubs in Britain, fell 6.9 percent after the company said sales for its financial year were down nearly a third compared with last year. Because of additional restrictions on the hospitality industry, the company also said it was looking to cut 2,150 jobs that are currently furloughed. That adds to concerns that Britain will experience a sharp rise in unemployment this winter as data published this week showed that the jobless rate had already climbed to a three-year high.
On the afternoon of Feb. 24, President Trump declared on Twitter that the coronavirus was “very much under control” in the United States, but hours earlier, senior members of the president’s economic team, privately addressing board members of the conservative Hoover Institution, were less confident.
Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy. To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.
The next day, board members — many of them Republican donors — got another taste of government uncertainty from Larry Kudlow, the director of the National Economic Council. Hours after he had boasted on CNBC that the virus was contained in the United States and “it’s pretty close to airtight,” Mr. Kudlow delivered a more ambiguous private message. He asserted that the virus was “contained in the U.S., to date, but now we just don’t know,” according to a document describing the sessions obtained by The New York Times.
The document, written by a hedge fund consultant who attended the three-day gathering of Hoover’s board, was stark. “What struck me,” the consultant wrote, was that nearly every official he heard from raised the virus “as a point of concern, totally unprovoked.”
The consultant’s assessment quickly spread through parts of the investment world. U.S. stocks were already spiraling because of a warning from a federal public health official that the virus was likely to spread, but traders spotted the immediate significance: The president’s aides appeared to be giving wealthy party donors an early warning of a potentially impactful contagion at a time when Mr. Trump was publicly insisting that the threat was nonexistent.
Interviews with eight people who either received copies of the memo or were briefed on aspects of it as it spread among investors in New York and elsewhere provide a glimpse of how elite traders had access to information from the administration that helped them gain financial advantage during a chaotic three days when global markets were teetering.
To many of the investors who received or heard about the memo, it was the first significant sign of skepticism among Trump administration officials about their ability to contain the virus. It also provided a hint of the fallout that was to come, said one major investor who was briefed on it: the upending of daily life for the entire country.
“Short everything,” was the reaction of the investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.
Americans used one-time stimulus checks they received from the federal government early in the pandemic to pad their savings accounts and pay off debt, new research from the Federal Reserve shows.
Households spent just 29 percent of the money they received earlier this year, the Federal Reserve Bank of New York said in a post on its website, citing its Survey of Consumer Expectations, conducted in June and August. Another 36 percent of the cash was saved, while 35 percent was used to pay down debt.
Americans adults who qualified for the stimulus received up to $1,200 each, with an extra $500 added per child in the household. Out of the Fed’s sample, 89 percent of households received money.
Poorer families and those who lost jobs or income amid the pandemic were more likely to use their money to pay down debts, while richer families saved the money.
“The economic impact payments, by increasing both household income and the debt pay down, contributed importantly to the sharp increase in the overall saving rate during the early months of the pandemic,” the central bank’s researchers wrote in the post.
Several factors might have been behind the relatively low spending and high saving. People were unsure when the economic crisis would clear up, the researchers wrote, and might have been acting cautiously. They were on lockdown, which might have limited opportunities to spend, and some rent payments — which count as consumption — were delayed.
The trends seem unlikely to change if new aid becomes available: In the August survey, the New York Fed asked what households might do if they received another $1,500 check. Respondents expect to spend even less of that money, about 24 percent.
The newfound savings buffer cushioned the blow as expanded unemployment insurance expired. Consumer spending has held up even though millions remain unemployed but are no longer receiving an extra $600 per week from the federal government.
“We’re still benefiting from the stimulus,” Randal K. Quarles, vice chair for supervision at the Fed, said during an event on Wednesday, noting that it makes it harder to guess what will happen to the economy once that tailwind fades.
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Wells Fargo has found evidence that some employees filed fraudulent applications to get money from a Small Business Administration relief program supporting companies dealing with coronavirus lockdowns, according to an internal memo. The memo said the employees had created fake profiles to file for money from the Economic Injury Disaster Loan program. “We have terminated the employment of those individuals and will cooperate fully with law enforcement,” the bank’s head of human resources, David Galloreese, wrote in the memo, which was posted on an internal website on Wednesday.
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United Airlines lost $1.8 billion in the three months through September, with operating revenue down 78 percent compared with the same period in 2019. The airline said it ended September with more than $19 billion in cash and other available liquidity, boosted by a large debt offering backed by its mileage program and the ability to borrow $5.2 billion from the Treasury Department.
For three years, Lea Polizzi worked more than 50 hours a week as a nanny and a freelance photographer in New York City. But in March, when the pandemic hit, the family she worked for on the Upper East Side left the city, and all of her photography gigs dried up.
Ms. Polizzi, 24, filed for unemployment benefits and started receiving about $200 a week from the state, as well as a $600 federal supplement. Those payments enabled her to meet expenses — including the $1,100 rent for her apartment in the Bushwick neighborhood of Brooklyn — while she looked for a job.
But the $600 payments expired at the end of July. Since then, Ms. Polizzi has used about 75 percent of her savings — roughly $4,000 — to pay bills.
“That was the money I had saved to use for vacations or emergency funds,” Ms. Polizzi said. “I was going to buy a new camera. And then as soon as everything started going down, I had to put everything on hold, because I knew that I was going to end up having to pay rent with it eventually.”
Ms. Polizzi recently received $900 from Lost Wages Assistance, a short-term supplement from the federal government, and she expects one more payment from the program in the next few weeks.
In the meantime, she has taken matters into her own hands. She is making masks, lingerie, hats and jewelry and selling the items online at $25 to $200 apiece.
She has made about 60 sales. “Hopefully, I’ll be able to make it work and just pay all my bills through my art ventures,” she said.